Broadcasters disagree over future of the reach rule

Regional free-to-air television broadcasters have united in calling for the “reach rule" to be scrapped – but their metropolitan counterparts are divided on the highly contentious issue.

WIN Corp
,
Prime Media
and
Southern Cross Media Group
are all pushing for the removal of rule, which prevents them from merging with metropolitan ­networks, as momentum gathers behind an overhaul of long-standing ownership restrictions.

The rule prohibits a commercial TV network from reaching more than 75 per cent of the population and its removal would trigger a spate of takeover activity.

“Our view is the reach rule should be repealed sooner rather than later," WIN Corporation chief executive
Andrew Lancaster
told The Australian Financial Review.“It’s a rule that makes no sense and is outdated."

The regulation was enacted before the emergence of the internet, which has changed the media industry and given people in regional areas access to ­myriad different sources of news and entertainment.

Regional broadcasters pay metro­politan networks, such as
Seven West Media
,
Nine Entertainment
and
Ten Network Holdings
, to air their content.

Affiliate agreements were renegotiated last year at higher rates in part to accommodate the rising costs of sport broadcast rights.

WIN, controlled by billionaire
Bruce Gordon
, broadcasts mostly Nine content and Mr Lancaster argued that as ­affiliation fees were rising, regional ­networks were still paying to produce local news and content. “We have always said that we should be supporting regional communities, producing local news and ensuring local ads are being aired," he said.

Related Quotes

Company Profile

“With affiliation fees going up for all the regional networks, it reduces our ­ability to invest in local product. The best way to ensure this investment continues is to scrap the reach rules."

Reluctance from some networks

Some players including WIN, Seven and Ten were reluctant to support the scrapping of the reach rule when it emerged last March that Nine was in ­preliminary talks to merge with Southern Cross.

Last year, a parliamentary committee recommended the regulation be repealed, subject to installing legally enforceable safeguards for local TV ­programs in regional areas. This would include establishing a clear definition of local content to ensure regional viewers had access to appropriate levels of high-quality, locally devised and locally presented programming.

Prime Media chief executive
Ian ­Audsley
said the reach rule was an “anachronism". “Our view is it just serves absolutely no purpose in a post-analogue convergent world," he said. “I don’t see any reason why broadcasters should be constrained to audience limits when new players are ubiquitous and unrestrained."

Mr Audsley said there was strong demand for local programming, meaning it was unlikely to be compromised by dropping the rule. “We continue to invest in our local programs and we are very pleased with the return on investment we get from them," he said.

Southern Cross Media Group chief
Rhys Holleran
said: “We’ve been very consistent in that we think the reach rule belongs in a century long gone. The argument that these rules benefit regional viewers is just nonsense."

However, the rule remains a highly sensitive topic among the metropolitan networks. Nine Entertainment Co chief executive
David Gyngell
told the ­Financial Review he wanted to see the rule scrapped.
Hamish McLennan
, CEO of Ten Network Holdings, remained guarded, saying: “We’ve consistently said that we need to understand the full basket of changes on media reform before there are any changes to the reach rule."

Meanwhile Seven West Media, which declined to comment, will argue that scrapping the rules is neither an urgent nor a simple reform. It would not support change without considerable further thought on its implications.

A network’s position on a reform often coincides with its strategic aims.

The CEOs of Nine, Seven and Ten attended a board meeting of their lobby group Free TV Australia last year for the first time in years after being urged by its new chairman
Harold Mitchell
.

Mr Mitchell told the Financial Review: “The [Communications] minister ­[
Malcolm Turnbull
] has been very good in talking widely with all players in the industry and this will bring about a ­consensus. I support the consultative approach which he is taking."

Mr Turnbull’s office will shortly publish online dozens of letters sent to him by media organisations before Christmas in response to his request for a list of redundant legislation that could be repealed. Mr Turnbull told the Financial Review last week he would review the reach rule and the “two-out-of-three" rule, which ­prevents a single entity owning more than two of a newspaper, TV ­station and radio licence in the same market.

Mr Audsley said this rule was outdated, given it did not address digital media – a view supported by Mr Gyngell and Mr Holleran.

Digital ad spend is expected to overtake total television advertising this year to become Australia’s biggest medium.

“With that regulation there is no consideration of the impact of digital media," Mr Audsley said. “It basically assumes that people don’t consume media online. It doesn’t make any sense in the contemporary context."